Drop the Debt

BBC News | Africa | World Edition

Debt Relief

January 27, 2010

From Bono to Angelina Jolie, the ‘cool’ humanitarian thing to do these days is to send money to Africa, you know, to help feed, shelter, educate and provide medical services to the starving boney children with flies on their eyes. What may come across as shocking to the Bonos of our world is that not all humanitarian efforts have helped the continent, at least that’s what Moyo would say. Most Africanists have heard of Zambian economist Dambisa Moyo for her clear-cut assertion that foreign aid has not only stagnated, but that it has also been the root cause of developmental retardation for the African continent. Perhaps it is a combination of Moyo’s conservative side and her African roots that have given her considerable attention, often compared to Ayaan Hirsi-Ali -another conservative figure bred on the continent who is widely known for criticizing the Prophet Muhammad. It comes as no surprise that both Hirsi Ali and Moyo have contributed their knowledge and experience to the American Enterprise Institute for Public Policy Research, a harbor of conservative scholar academia.

The emergence of popular, educated African women icons such as Moyo has given Western as well as other audiences new paths for understanding why Africa’s predicament is still enduring decades after colonial rule. Moyo’s perspective is not a completely unexplored opinion, authors such as Paul Easterly have advocated for diminishing help from bureaucratic organizations and instead searching for what he refers to as ‘homegrown development’. So what is fundamentally different about ‘Dead Aid’? Moyo’s audience ranges from prominent politicians such as Rwandan President Paul Kagame who have been pushing for gradual independence from foreign assistance, to economists such as Jeffrey Sachs who advocate for the ‘end of [African] poverty’ through Western aid.

Throughout her many interviews, Moyo reiterates the main issues that she also raises in her book, one of which argues that foreign aid fuels corruption since there is no transparent allocation of the donation. Moyo raises an interesting point about the lack of fund appropriation for foreign aid; she also understands how this has trapped Africa in an aid dependency cycle that, coupled with operational bureaucracies, disables the development of private enterprise. Thirdly, Moyo argues that ‘large inflows of capital… really kill off the export sector’ because most African nations are abundant in extractable minerals and resources. Finally, Moyo elaborates on the consequences of corruption that result in the African government’s lack of accountability, rather than being held responsible by its people, governments have geared their liability to international organizations and businesses. As a result, Moyo makes the assertion that an African middle-class is barely existent, instead the disparities between the wealthy who remain in power and the poor who are barely surviving, continue to be the center of African realities.

Personally, I would say that Moyo’s collection of data that support her one-sided views have elements of truth within them, however, it would be unrealistic to reinforce a 'let's cut off all foreign aid to Africa' instantly. Despite the corruption and the bureaucracy, foreign aid has been the main source for the survival of at least an estimated millions, for this reason, the plan to decrease and eventually cut off foreign aid would be to strengthen the government's provision of public services. The measures would take time especially because most African governments are known for their notorious personal economic drives, that is why an internal change in the political institutions would have to be upheld alongside the development of a stronger civil society. As Moyo suggests, micro-finance is one of the most effective ways of establishing these goals since a 'homegrown' or bottom-up development could be sustainable in the long-term growth of Africa.The biggest challenges remain: how to deal with political greed? how do we create incentives for African governments to establish public services?

Yes, the topic of Africa’s debt is thankfully back in the news in a big way, with the reintroduction of the “Stop VULTURE Funds” Act (H.R. 2932) last Thursday, June 18, by Representative Maxine Waters (D-CA). Building on the aims of a similar bill introduced in August 2008, the act now before Congress seeks to outlaw the profiteering by private equity or hedge funds in the U.S. at the expense of some of the world’s poorest nations. [ Africa Action Press Release]

Activists and campaigners celebrated this important step in opposition to particular subset of funds that target distressed sovereign debt - buying up the debt of poor countries from either a government or commercial creditor. Vulture Funds' apparently clawing (no pun intended) desire to make a profit – profits reaching into the tens of millions of dollars – siphon much-needed funding away from initiatives like health care, education, combating HIV/AIDS, clean water access etc. in impoverished countries.

“A ‘vulture fund’ is a company that buys up the debt of poor countries at a big discount from the original owner with the purpose of suing the indebted country in court once it has some money (often after debt cancellation)”

“…Donegal International, got hold of $15 million from Zambia, money that was freed up by debt relief and should have been used for the fight against HIV/AIDS and poverty. Zambia was not alone: A 2007 report on vulture funds by IMF staff showed that 11 out of 24 poor countries approached said they were involved in litigation worth a total of $1.8 billion with 46 creditors.”

“These companies tend to be quite secretive, and very many of them are based in tax havens. Some are owned by large (often US-based) financial institutions such as hedge funds. In other cases, there is no information on who owns them. Often companies are set up simply to pursue one debt, then shut down again.”

Jubilee USA’s Briefing Note also points out that in Niger, “lawsuit costs were 52.2 percent of health and education expenditure,” and 98.3 percent of Cameroon’s budget revenue ($51.7 million).

The Congressional Representatives supporting the bill have drawn a line in the sand, standing on the side of Heavily Indebted Poor Countries (HIPC), and they are certainly not the only ones lending a voice to the cries of discontent over Africa’s debt situation. These issues have also been explored in more popular realms as well, where the message may not be in technical terms or political jargon, but attempt to start dialogue over Africa’s urgent debt issues.

Enter Bamako: Abderrahmane Sissako’s 2006 film, whose foundation is the exploration of the crippling debt, poverty, and social injustice facing many African countries.

With a plot both original in its premise and powerful in the questions that it raises, Bamako immediately came to my mind because, in many ways, it calls for the changes in Africa’s debt situation that activists have been working on and which has culminated in the Vulture Funds bill.

The central storyline follows a trial in which the citizens of Mali charge that the policies of the defendants, the World Bank and International Monetary Fund (IMF), have greatly hurt, rather than improved, the socio-economic and political stability of the country. Using real judges and attorneys (who wrote their own dialogue), as well as regular, Malian citizens as witnesses – invited to improvise their testimonies – the result is a film that is much more than a courtroom drama, played out in the dusty courtyard of a Bamako household. In an interview with Sight & Sound, Sissako pointed out that “Victims in Africa don’t need inventing…Just go out on the street and they’re there.” And, truly, the people and their representatives are frank in relating their grievances surrounding such ills as privatized water, education, medicine, and other social services, ultimately questioning the sincerity of such institutions’ claims to want to improve developing courtiers.

Arguably, the power of the film lies in the line it walks between reality and fiction. The possibility of seeking to hold the actions of The World Bank and IMF accountable to the Africans on the ground, who are the ones who suffer from the exploitation of illegitimate debt and poor social and economic program planning, further highlights the power imbalance at play (since deep down, a part of us knows such a trial could never happen). And, in between debates and testimonies, is the interplay and interjection of everyday life in Mali – the people around the neighborhood who pay avid attention to the trial’s broadcast on the radio, and the others who are distracted, indifferent, getting married, or working all day. The documentary style of filming only increases the feeling that you are watching a case of immediate, real-world concern, yet the undercurrent of Sissako’s film is the near-futility of attacking such a colossus of a predicament.

Unlike other movies where a trial figures prominently in the plot, there is no final verdict handed down in Bamako and the film’s conclusion becomes a sign that it is less about the decision that could come from such a trial (or even whether such institutions should be put on trial), and more about educating those who watch. Is globalization the solution to Africa’s problems? Is foreign aid to the continent actually easing poverty? And, honestly, why would the World Bank, IMF, and even other wealthy nations want to perpetuate the terrible conditions of poverty, hunger, illiteracy that plague many of Africa’s nations? (a question even asked by a lawyer for the World Bank in the film). Sissako’s work asks us to think carefully about these questions if we haven’t before, and to not only see the disconnect between the aims of these financial institutions and the reality of Malian life, but to try and find some hope in resolving these issues.

With the reintroduction of the “Stop VULTURE Funds” Act, with additional co-sponsors and even more momentum behind it, the aims of advocates and activists have now been placed into the hands of the highest government officials in the country. It couldn’t come at more needed time, with the economic downturn hitting poor countries hard and world hunger recently hitting the 1 billion mark – the vast sums of money Vulture Funds seek is badly needed by citizens of the impoverished nations they target. Could it be that we will see change step off the silver screen and into the real world? Only time will tell.

Check out Bamako – on DVD now, and Africa Action’s resource pages for more information on Africa’s Debt and Vulture Funds.

October 17, 2008

Today I attended a panel discussion entitled Leveraging International Frameworks to Fight Poverty at InterAction, the American Council for Voluntary International Action. The talk was part of InterAction's Progress Against Poverty Week. This week is “dedicated to celebrating how far the international development and humanitarian community has advanced in the fight to end global poverty.” The panelists spoke from experience with various humanitarian and development organizations from Oxfam to Bread for the World. Their focus was on the current international climate and interactions between NGOs, governments and international policy makers. The topics ranged from the need to modernize debt relief and the possibilities of an advancement of a coherent development agenda, as well as positive communication between the U.S. and European countries on the subject.